city of hamilton€¦ · receiving $12.1 million (based on 2007 net win) compared to $4.5 million....
TRANSCRIPT
CITY WIDE IMPLICATIONS
CITY OF HAMILTON
CORPORATE SERVICES DEPARTMENT
Budgets & Finance Division Report to:
Mayor and Members Committee of the Whole
Submitted by:
Peter A. Barkwell Acting General Manager, Finance & Corporate Services
Date: July 17, 2008 Prepared by: T. Hewitson ext. 4159
M. Di Santo ext. 6247 SUBJECT: Municipal Share of Slot Machine Revenue (FCS08069) (City Wide) (Item I of Audit & Administration Committee Outstanding Business
List) RECOMMENDATION: a) That the City of Hamilton support the City of Toronto in renegotiating the
municipal share of slot machine revenue with the Ontario Lottery and Gaming Corporation (OLG);
b) That the City of Hamilton, together with all other host municipalities of Slots-at-
Racetrack, jointly approach the Ontario Lottery and Gaming Corporation (OLG) and the Ministry of Energy & Infrastructure, to collectively request that the current agreement with respect to the municipal share of slot machine revenue be increased to 10% of the slot operation’s gross revenues (Net Win), regardless of the number of slot machines, subject to not negatively affecting the amount currently received by the racetrack owner and horse breeders, or cause the reduction in grants provided through Ontario Trillium Foundation;
c) That a copy of report FCS08069 “Municipal Share of Slot Machine Revenue” be
forwarded to all host municipalities of Slots-at-Racetrack, the Ontario Lottery and Gaming Corporation (OLG) and the Ministry of Energy & Infrastructure; and
d) That Item "I" be removed from the Audit and Administration Committee
Outstanding Business List. Peter A. Barkwell, Acting General Manager Finance and Corporate Services
SUBJECT: Municipal Share of Slot Machine Revenue (FCS08069) (City Wide) (Item I of Audit & Administration Committee Outstanding Business List) Page 2 of 6
EXECUTIVE SUMMARY: The City of Hamilton, similar to other host municipalities of Slots-at-Racetrack, receives quarterly payments from the Ontario Lottery and Gaming Corporation (OLG) for its’ share of the slot operation’s gross revenues (Net Win). This share is calculated as follows: 5% for the first 450 slot machines and 2% for the balance in excess of 450 machines. Flamboro Downs currently has about 800 slot machines, which results in the City of Hamilton receiving a 3.7% share of the slot operation’s Net Win (gross revenue). Since Flamboro Downs has in excess of 450 slot machines, the City of Hamilton’s percentage share is less than the full 5% allocated to host municipalities with 450 or fewer slot machines, and significantly less than the 10% share received by both the racetrack owners and horse breeders. The following Table identifies the quarterly payments received since commencing the Slots-at-Racetrack operations at Flamboro Downs in the Fall of 2000.
Total2000 2001 2002 2003 2004 2005 2006 2007 2008 To Date
1st Quarter 691,565 1,048,960 1,180,250 1,307,288 1,041,615 1,069,219 1,032,964 1,121,856 8,493,717 2nd Quarter 773,525 1,173,638 1,316,657 1,290,854 1,073,206 1,069,869 1,128,582 7,826,331 3rd Quarter 964,306 1,193,755 1,320,163 1,111,710 1,130,800 1,132,515 1,210,569 8,063,818 4th Quarter 569,500 1,002,519 1,180,139 1,336,482 1,086,264 1,053,735 1,098,362 1,109,751 8,436,752 Total 569,500$ 3,431,915$ 4,596,492$ 5,153,552$ 4,796,116$ 4,299,356$ 4,369,965$ 4,481,866$ 1,121,856$ 32,820,618$
History of Flamborough Slot Revenues
o date, the City of Hamilton has received approximately $33 million. During the same me period, Flamboro Downs slot operation’s gross revenues (Net Win) were $872 illion. The amount allocated to the City of Hamilton therefore represents about 3.8%.
d to
10% to horse breeders • 5% to host municipalities for the first 450 slot machines, and 2% for any slot
(this equates to 3.7% based on Flamboro nes)
• LG’s ium Foundation)
TtimHad the City been entitled to the same share as the racetrack owners and horse breeders (10%), this would have totalled in excess of $87 million over the same timeperiod, representing an additional $54 million. In 2007 alone, the City of Hamilton wouldhave received $12.1 million, which represents an increase of $7.6 million comparewhat was actually received. The current distribution of proceeds (Net Win) from slots at Ontario’s racetracks is as follows:
• 10% to racetrack owners •
machines in excess of 450Down’s 800 slot machi
• 2% towards the Province’s problem gambling programs balance (73%-75%) to the Province (to cover OLG operating costs and Ocontribution to the Ontario Trill
SUBJECT: Municipal Share of Slot Machine Revenue (FCS08069) (City Wide) (Item I of Audit & Administration Committee Outstanding Business List) Page 3 of 6
Any inshare (wi to Ontario Trillium
oundation). Through the Ontario Trillium Foundation, the OLG provides in excess of
OLG
fect
crease to a host municipality’s share should come from the Province’s 73%-75% thout negatively affecting the amount guaranteed
F$100 million annually towards Ontario’s charities and community organizations. These funds are made possible through the use of slot machine revenues from all 17Racetrack Slot facilities. Community organizations and charities in the Hamilton area receive approximately $3 million annually from the Ontario Trillium Fund. Any agreed- upon increase in a host municipality’s share of slot revenues should not negatively afthe Ontario Trillium Fund as this, in turn, would negatively impact these community organizations and charities. The current share provided to racetrack owners and horse breeders should also not be reduced. BACKGROUND:
In a letter dated April 22, 2008, the City of Toronto has requested the City of Hamilton’s support in renegotiating the municipal share of slot machine revenue with the Ontario ottery and Gaming Corporation (OLG). Under the existing Racetrack Municipality
of
ontribution Agreement”. As tated in this agreement, one of the host municipality’s role is “at no additional cost to
e start he
LContribution Agreement, a host municipality of a Slots-at-Racetrack facility receives a share of the slot operation’s gross revenues (Net Win) calculated as follows: 5% for thefirst 450 slot machines and 2% for the balance in excess of 450 machines. The CityToronto is requesting to increase the municipal share to 10% of the slot operation’s gross revenues (Net Win) to equal to that of what is currently being received by the racetrack owners and horse breeders (attached is a copy of Toronto’s letter and report received by Council on May 14th, 2008 as “Appendix A”). Currently, all 17 host municipalities of Slots-at-Racetracks have the same financial arrangement with OLG through a “Racetrack Municipality CsOLC, provide for additional policing services at or near the Racetrack as may be determined by the Municipality and local police authorities, acting reasonably, to be necessary or desirable, to maximize the adult public’s ability to access, utilize and derive enjoyment from, the Prescribed Lottery Scheme on a year-round basis.” Since thof this arrangement with OLG, the City of Toronto’s position is that a larger share of tgross gaming revenue is required, as host municipalities incur addition costs (police, fire, transit, roads, planning) as a result of these slot operations.
SUBJECT: Municipal Share of Slot Machine Revenue (FCS08069) (City Wide) (Item I of Audit & Administration Committee Outstanding Business List) Page 4 of 6
ANALYSIS/RATIONALE:
Flamboro Downs currently has 800 slot machines. The existing municipal share formula results in 2007 slot revenues of approximately $4.5 million apportioned to the City of Hamilton. This is calculated by taking 5% of the net win for the first 450 slot machines and 2% for the balance in excess of 450 machines (800 – 450 = 350). This calculation is demonstrated below: $121.4 M (Net Win) X 5% X (450/800) = $3.4 M
+
$121.4 M (Net Win) X 2% X (350/800) = $1.1 M
$4.5 Million
Dividing Hamilton’s share by the total net win reveals that the percentage share entitlement to the City of Hamilton is actually 3.7%.
$4.5 Million = 3.7 %$121.4 Million
If the municipal share were increased to 10%, this would result in the City of Hamilton receiving $12.1 million (based on 2007 net win) compared to $4.5 million. This is an additional $7.6 million to the City of Hamilton. This additional amount should come from the Province’s current share of the Net Win. As illustrated in the table below, the Province’s share of Flamboro Downs’ 2007 Net Win was $90 million (which represents a 74.3% share). After allowing for major OLG operating expenditures, the Province’s revenue from the slot operations at Flamboro Downs is over $76 million. Increasing the municipal share to 10% can therefore be adequately funded from this balance, without negatively affecting the remaining stakeholders or the OLG’s commitment to the Ontario Trillium Foundation.
SUBJECT: Municipal Share of Slot Machine Revenue (FCS08069) (City Wide) (Item I of Audit & Administration Committee Outstanding Business List) Page 5 of 6
($ millions)
2007 NET WIN 121.4$
Distribution of Net Win:Host Municipality (City of Hamilton) 4.48$ 3.7%Racetrack Owner 12.14 10.0%Horse Breeder 12.14 10.0%Problem Gambling Problem 2.43 2.0%Province 90.18 74.3%
121.4$
Province's Gross Share 90.18$ Less OLG Operating Costs: Payroll 11.00$ Goods/Services Purchased 2.30 (13.30)
Balance (before contribution to Trillium Foundation) 76.88$ ALTERNATIVES FOR CONSIDERATION:
Increasing the percentage share of the Net Win to 5%, regardless of the number of slot machines, would also result in additional funds to the City of Hamilton and, most importantly, treat all host municipalities equally. The current agreement with OLG, results in municipalities with more than 450 slot machines receiving less than a 5% share, while municipalities with 450 slot machines or fewer, receiving their full 5% share. This equation is unfair and results in host municipalities with greater than 450 slot machines being unfairly treated by receiving a reduced share. Had the City of Hamilton received a full 5% share, this amount would have equated to approximately $6.1 million in 2007, which is an additional $1.6 million than what was actually received in 2007. The Province benefits from the additional revenues as a result of more slot machines, however, based on the current arrangement, the municipality is penalized with a reduced share. FINANCIAL/STAFFING/LEGAL IMPLICATIONS:
Financial - Any changes to the current financial agreement with OLG would impact the quarterly payments currently received by the City of Hamilton. Since slot revenues are now allocated to the General Levy, all communities within the City of Hamilton would benefit from an increased share of the Net Win. Staffing – none.
SUBJECT: Municipal Share of Slot Machine Revenue (FCS08069) (City Wide) (Item I of Audit & Administration Committee Outstanding Business List) Page 6 of 6
Legal – The current “Racetrack Municipality Contribution Agreement” would have to be amended to reflect any changes to the current financial arrangement between the City and the OLG. The OLG has stated that any change to the financial arrangement with one host municipality would result in a similar change to all host municipalities. POLICIES AFFECTING PROPOSAL:
N/A. RELEVANT CONSULTATION:
Staff have consulted with the City of Toronto and the Ontario Lottery and Gaming Corporation (OLG). CITY STRATEGIC COMMITMENT:
By evaluating the “Triple Bottom Line”, (community, environment, economic implications) we can make choices that create value across all three bottom lines, moving us closer to our vision for a sustainable community, and Provincial interests.
Community Well-Being is enhanced. Yes No Environmental Well-Being is enhanced. Yes No Economic Well-Being is enhanced. Yes No Does the option you are recommending create value across all three bottom lines? Yes No Do the options you are recommending make Hamilton a City of choice for high performance public servants? Yes No
